Supply

Introduction

Fossil fuels currently supply most of the world's energy, and are expected to continue to do so for the foreseeable future.1 While supplies are currently abundant, they won't last forever.2 Oil production is in decline in 33 of the 48 largest oil producing countries,3 yet energy demand is increasing around the globe as economies grow and nations develop.4 Abundant energy drives economic development, which in turn creates demand for still more energy.5 But it also puts pressure on supply and impacts the environment. Where does our fuel come from, how is our energy supply and the sources of energy changing, and what can we expect in the future?

  1. World Energy Outlook 2004, p. 29.
  2. Ibid.
  3. Vital Signs, Worldwatch Institute, 2005, p. 30.
  4. World Energy Outlook 2004, p. 29.
  5. International Energy Outlook, 2004, p 11.

Oil and Gas

Oil and gas currently provide more than half of the world's energy supply, and according to the International Energy Agency, they—along with coal—will continue to be the major sources of energy well into the 21st century.6 OPEC provides about 40% of the world's oil, although its share is slated to grow. While output of conventional oil and gas from areas like Russia and the Caspian region could rise, North America and the North Sea are expected to decline gradually.7

Over the longer term, where oil and gas are found and in what form will undergo a transformation. Where costs were once prohibitive, energy companies are using new technologies to extract oil and gas from existing reservoirs.8 And offshore technologies are allowing companies to find and extract oil and gas in deep ocean water—a location that was considered inaccessible just a few years ago.9 Fossil fuels also exist in unconventional forms—hydrocarbons contained in oil-sands, and even shale are believed to have more energy content than all the oil in Saudi Arabia.10 The catch is that it may currently take more energy and may cost more to extract and produce oil from some of these unconventional forms than would be gained.

Then there's natural gas. Getting natural gas to market takes time and investment. But gas is a cleaner source of energy than oil or coal, and emits fewer greenhouse gases.11 And natural gas will only increase in significance. Demand for gas is projected to grow 2.8 % annually through 2025,12 somewhat faster than demand for oil.

  1. Ibid.
  2. Ibid.
  3. Chevron website
    http://www.chevron.com/technology/core_technologies/.
  4. Ibid.
  5. USA Today, 9/7/04
    http://www.usatoday.com/money/industries/energy/2004-09-07-oil-sands_x.htm.
  6. Naturalgas.org
    http://www.naturalgas.org/environment/naturalgas.asp.
  7. International Energy Outlook, 2004.

Renewables

Renewable sources of energy (biomass, solar, wind, hydro and geothermal) are self-replenishing and clean, and currently contribute 15% of the world's energy supply.13 Solar power is expanding as technology improves and its cost becomes more competitive.14 Commercial wind turbines are now harnessing energy in over 65 countries, making wind power the world's fastest growing source of energy after solar.15 And geothermal energy—literally "heat from the earth"—is meeting a significant portion of electrical power demand in several developing countries.16

But each of these sources has its limitations—technologies are still developing and costs are high in many cases. While renewables will continue to play a growing role, they aren't expected to overtake fossil fuels in the near future in meeting global energy demand.17

  1. Tomorrow's Markets, World Resources Institute 2002. p. 25.
  2. Wall Street Journal, June 2, 2005
    http://www.seia.org/news/external/WSJJune2_2005.asp.
  3. Vital Signs, p. 34.
  4. US Newswire, May 16, 2005
    http://press.arrivenet.com/pol/article.php/638535.html.
  5. World Energy Outlook 2004, p. 29.

Other Alternatives

Nuclear power has its proponents and skeptics, but it may reemerge as a significant source of energy.18 It has been developed extensively in several European countries, and currently provides 75% of France's electricity.19 While concerns over operating safety and waste disposal linger, some environmentalists and governments find nuclear power appealing because it is relatively clean and emits no greenhouse gases.20

Hydrogen also holds some promise in powering fuel-cell vehicles. The issue is finding sources of pure hydrogen. Currently, the least expensive way of deriving hydrogen is by reforming natural gas, which means we will continue to be reliant on fossil fuels. Another way to produce hydrogen is through electrolysis of water, using electricity or sunlight.21

  1. International Energy Outlook 2004, World Energy and Economic Outlook, p. 3.
  2. http://www.ambafrance-us.org/intheus/nuclear/n2f2/spring2003.asp.
  3. New York Times, May 29, 2005
    http://www.climateark.org/articles/reader.asp?linkid=42280.
  4. Energy Information Administration website
    http://www.eia.doe.gov/kids/energyfacts/sources/SecondaryHydrogen.html.

What's the challenge?

The challenge for the energy sector is to optimize the development and use of all sources of energy, and drive commercialization of new and emerging sources through successful business—while continuing to meet the world's growing energy demands efficiently and with minimal environmental impact.

What's next?

Oil, gas, and coal will continue to be a significant energy source for decades to come.22 But, over time, they will likely share more and more of the market with other sources of energy.23

The sources of energy are changing as energy companies continue to meet the challenge of fulfilling the world's demand in the near term and well into the future.

  1. World Energy Outlook 2004, p. 29.
  2. International Energy Outlook 2004, World Energy and Economic Outlook, p. 2.